Section 44BB applies to rig-hiring receipts for mineral oil exploration, excluding them from royalty treatment under tax law.

Receipts from hiring rigs to an Indian entity for drilling and exploration of mineral oils fall within the special presumptive scheme in section 44BB, because that provision covers a non-resident supplying plant or machinery on hire for prospecting, extraction or production of mineral oils and applies on gross receipts without requiring a permanent establishment in India. The same receipts are excluded from the royalty definition in section 9(1)(vi) by the statutory carve-out in Explanation 2, clause (iva), so they cannot be taxed as royalty merely because the equipment was leased for oil exploration.

---

---

Issues: Whether receipts from leasing or hiring of rigs are taxable as business profits under section 44BB of the Income-tax Act, 1961 on a presumptive gross basis, or as royalty under section 9(1)(vi) read with section 115A of the Income-tax Act, 1961.

Analysis: The receipts arose from supply of rigs on hire to an Indian entity for use in drilling and exploration of mineral oils, which falls within the express ambit of section 44BB as a non-resident supplying plant and machinery on hire for prospecting, extraction, or production of mineral oils. Section 44BB is a special presumptive provision applying at 10% of gross receipts and does not require a permanent establishment in India. The definition of royalty in section 9(1)(vi) includes consideration for use or right to use industrial, commercial, or scientific equipment, but the statutory exclusion in clause (iva) of Explanation 2 removes amounts covered by section 44BB from that definition. The receipts therefore could not be taxed as royalty merely because the equipment was leased for use in oil exploration.

Conclusion: The receipts are chargeable under section 44BB of the Income-tax Act, 1961 and not as royalty under section 9(1)(vi) read with section 115A of the Income-tax Act, 1961.

Ratio Decidendi: Where a non-resident earns receipts from hiring plant or machinery used or to be used in the prospecting for, or extraction or production of, mineral oils, those receipts fall within section 44BB and are excluded from the royalty definition under section 9(1)(vi).

---